A judge in Illinois on Tuesday heard arguments for and against a proposed settlement that would give thousands of mentally ill nursing home residents in the state the chance to move into community housing.

Nursing homes in Illinois are facing new higher standards after a unanimous vote in the state's House—118-0—to pass a major overhaul of the long-term care system. A similar vote is expected in the Illinois Senate, according to local reports.

A recent legal settlement regarding mentally ill nursing home residents in Illinois has the potential to transform the state's long-term system. It also likely will have a ripple effect on the field nationwide.

Nearly 4,500 of Illinois' mentally ill nursing home residents soon will have the option of moving into community-based programs, according to the terms of a groundbreaking settlement between the state and the American Civil Liberties Union.